TY  - JOUR
AU  - Aiyagari,S. Rao
AU  - Gertler,Mark
TI  - Asset Returns with Transactions Cost and Uninsured Risk: A Stage III    Exercise
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3481
PY  - 1990
Y2  - October 1990
UR  - http://www.nber.org/papers/w3481
L1  - http://www.nber.org/papers/w3481.pdf
N1  - Author contact info:
Mark Gertler
Department of Economics
New York University
269 Mercer Street, 7th Floor
New York, NY 10003
Tel: 212/998-8931
Fax: 212/995-4186
E-Mail: mark.gertler@nyu.edu
AB  - (iii) Transaction velocities are much higher for liquid assets than for stocks, specifically, we explore the extent to which incorporating an explicit motive for holding liquid assets can explain the above observations. We introduce a demand for liquid assets by adding uninsured individual risk together with differential costs of trading securities. We then parameterize a class of such models and compute the stationary equilibria. The simulations indicate that attempting to match the return data generates a ratio of liquid assets to income considerably be low observed levels. We then explore some possible reasons for this discrepancy.
ER  -